How I Learned About Edge While Working At Goldman Sachs
I got a job as an equity analyst at Merrill Lynch in 1994. The macro lesson I learned my first year was that markets are efficient. My second macro lesson was that it was good to be a monopoly. I learned that following cable companies as at Goldman Sachs. I left the street in January, 2000 to be the CEO of an internet monopoly, The .tv Corporation. We had bought the top level domain .tv from the Island nation of Tuvalu for $50M in 1999, payable over 10 years.
I learned another valuable lesson at Goldman Sachs. I had learned about edge. And you need edge to beat an efficient market. You need an edge in any business. It turns out capitalism’s a bitch. And while I had heard investors talk about having an edge., when they talked about their edge, it didn’t sound like edge to me. Then I got to Goldman Sachs.
My first day as an equity analyst at Goldman, in 1996, the Director of Research welcomed me to the firm. He then handed me a piece of paper with 10 names on it and said “Your job is to get good ideas and then tell your ideas to these 10 people in the order they appear on the page”. I clearly remember leaving his office thinking “I can do that!”
A couple months in to my new job, I get a good idea and called #1 on the list. He was highly complimentary of my idea, as we’re most of the other 9 people on the list. And so it went for the next eight months. I’d get an idea and call #1 and he’d compliment on the idea.
It wasn’t the until the 5th time I called #1 that he disagreed with my idea. I heard him out, but we still disagreed. He said that we’d just have to agree to disagree. And then he matter-of-fact told me that for the first time since I started calling him with ideas, he was only going to put on half a position.
I asked him “If you think I’m wrong, why would you put on any position?” He responded that he wasn’t putting on the position because of my idea. He was putting the position on because he knew I was going to call nine other guys with my idea, and they were all too stupid to know I was wrong.”
And there it was. Edge. In all it’s glory!!
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